Bar charts and risk Swan's Sportswear is considering bringing out a line of designer jeans. Currently, it is negotiating with two different well-known designers. Because of the highly competitive nature of the industry, the two lines of jeans have been given code names. After market research, the firm has established the expecta- tions shown in the following table about the annual rates of return: Market acceptance Very poor Poor Average Good Excellent Probability 0.05 0.15 0.60 0.15 0.05 Annual rate of return Line J Line K 0.0075 0.0125 0.0850 0.1475 0.1625 0.010 0.025 0.080 0.135 0.150 Use the table to: a. Construct a bar chart for each line's annual rate of return. b. Calculate the expected value of return for each line. c. Evaluate the relative riskiness for each jean line's rate of return using the bar charts.
Bar charts and risk Swan's Sportswear is considering bringing out a line of designer jeans. Currently, it is negotiating with two different well-known designers. Because of the highly competitive nature of the industry, the two lines of jeans have been given code names. After market research, the firm has established the expecta- tions shown in the following table about the annual rates of return: Market acceptance Very poor Poor Average Good Excellent Probability 0.05 0.15 0.60 0.15 0.05 Annual rate of return Line J Line K 0.0075 0.0125 0.0850 0.1475 0.1625 0.010 0.025 0.080 0.135 0.150 Use the table to: a. Construct a bar chart for each line's annual rate of return. b. Calculate the expected value of return for each line. c. Evaluate the relative riskiness for each jean line's rate of return using the bar charts.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Bar charts and risk Swan's Sportswear is considering bringing out a line of
designer jeans. Currently, it is negotiating with two different well-known designers.
Because of the highly competitive nature of the industry, the two lines of jeans have
been given code names. After market research, the firm has established the expecta-
tions shown in the following table about the annual rates of return:
Market acceptance
Very poor
Poor
Average
Good
Excellent
Probability
0.05
0.15
0.60
0.15
0.05
Annual rate of return
Line J
Line K
0.0075
0.0125
0.0850
0.1475
0.1625
0.010
0.025
0.080
0.135
0.150
Use the table to:
a. Construct a bar chart for each line's annual rate of return.
b. Calculate the expected value of return for each line.
c. Evaluate the relative riskiness for each jean line's rate of return using the bar charts.
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